Interest Rate Set to Double by July, Adding Thousands of Dollars to the Cost of Attending College for Federally-Subsidized Stafford Loan Recipients; Cuyahoga County Students Received More than $111 Million in Federally-Subsidized Stafford Loans for 2010-2011 School Year - Brown is a Sponsor of Legislation to Permanently Extend 3.4 Percent Interest Rate for Stafford Loans Instead of Proposed 6.8 Percent Rate; Change Would Add $2,800 to Cost of Loan for Average Student

Sunday, April 15, 2012

CLEVELAND, OH—More than 24,000 students in Cuyahoga County could be forced to pay thousands more for a college education if Congress fails to block a rate hike that would double the interest rates on federally-subsidized Stafford loans. Today, U.S. Sen. Sherrod Brown (D-OH) joined students at Cuyahoga Community College to outline legislation (S.2051) that would permanently extend the current rate, set at 3.4 percent.

“This amounts to a sucker-punch to students struggling to afford rising college costs. Unless Congress acts soon, college students in Cleveland and across Ohio could see significantly higher student loan bills by the fall term,” Brown said. “Federally-subsidized Stafford loans have allowed thousands of students—who might not otherwise be able pay for to college—afford the ever-increasing cost of higher education. With the average Ohio student graduating from a four- year institution with nearly $27,000 in tuition bills, the last thing we should be doing is adding to their already-heavy debt load. This bill would help ensure that more middle-class Ohioans can achieve their dream of going to college.”

The College Cost Reduction and Access Act of 2007 cut the fixed interest rates on newly-subsidized Stafford loans for undergraduate students to 3.4 percent over a set period of time, but the interest rates on any new subsidized Stafford loans will double to 6.8 percent on July 1, 2012 unless Congress takes action. The rate increase would not apply to loans that are currently in repayment or that have already been disbursed, but students still attending school after July 1st that need to take out new federally-subsidized Stafford loans would pay higher rates on the new loans, adding even more to their existing debt load. Federally-subsidized Stafford loans are offered only to students with significant financial need.

Brown was also joined by Untaya Miller, a recent graduate of Tri-C, who is now attending Cleveland State University with the help of subsidized Stafford loans and Angela Johnson, executive director of Enrollment Operations and Student Financial Assistance at Tri-C to outline how the legislation will help keep college tuition more affordable for the thousands of Ohio students that rely on federally-subsidized Stafford loans to earn their college degree. According to analysis by U.S. PIRG, this change would amount to an additional $2,800 on average for student over the life of their loan and about an additional $5,000 for the neediest students.

Brown also revealed a report, shown below, on the number of students at each college and university in Cuyahoga County that utilize subsidized Stafford loans. More than 24,000 students in Cuyahoga County, including more than 8,000 students at Tri-C, receive federally-subsidized Stafford loans, for a total of more than $111 million in loans. The average Ohio student graduates from a four-year college or university with nearly $27,000 in debt.

Last year, Brown introduced the Student Loan Simplification and Opportunity Act of 2011, legislation that would simplify the student loan repayment process. This legislation would help borrowers avoid financial penalties for missed payments, save Ohio graduates money on their student loans, and bolster the federal Pell Grant program that helped send more than 240,000 Ohio students to college from 2008-2009.